Taking the Parliamentary Report first, my initial conclusion is that it is very long. To be entirely honest I’ve only read around half of it so far, so it is too early to give a full reaction. On the other hand there are some parts that are to be welcomed.

The overall tone of the report recognises that things have gone wrong in the sector and need to change. Criminal sanctions and the new senior persons’ regime look like useful steps.

Turning to Osborne’s Speech at the Mansion House, the big news was that the Chancellor appears to have dropped plans to privatise RBS before the election but is pushing ahead with plans for a sell-off of Lloyds.

There are two concerns here – first does the Chancellor’s desire to get a good price for Lloyds (and eventually RBS) conflict with calls for tighter regulation and second is the timetable being driven by financial and economic considerations or political ones?

The imminent change of guard at the Bank of England takes place against the backdrop of a modestly improving UK economy, albeit one that appears to rest upon a pick-up in consumer spending and a recovering housing market.

“Funding conditions, helped by the funding for lending scheme, continue to look favourable and are supporting more competitive mortgage pricing and availability and a gradual resumption of lenders’ risk appetite.

“While the direction of travel is clear and fits well with the more positive housing surveys from RICS and others, our forward estimate does imply somewhat stronger house purchase activity than we had been expecting.

I understand that both Barclays and Nationwide feel a bit miffed about being forced to hit this tough so-called leverage ratio at this juncture, because they are rare in that they have been supporting economic recovery by increasing their net lending.

They now feel they are being penalised for doing what the government wants.

So I would expect there to be something of a spat between government and regulators about all this.

(Since I wrote this mortgage lending has improved but not the flow of credit to non-financial firms)

Fundamentally the problem is that the UK’s Macroprudential framework was designed back in 2010 when Osborne still thought he was going to be achieve his ‘new economic model’ of growth led by net trade and rising business investment. Macroprudential policy would act as a restraint on housing bubbles and debt funded consumer spending.

But now the Government have abandoned their pursuit of a ‘new economic model’ (in favour of something that looks very like the ‘old economic model) there is an obvious tension with the new regulatory regime.

I think these Government-banking-regulator spats are likely to continue.

Written by Duncan Weldon

Duncan Weldon was a Senior Policy Officer in the Economic and Social Affairs Department covering macroeconomics and regional policy. Before joining the TUC he had a fairly varied career taking in the Bank of England, fund management, the Labour Party…

@DuncanWeldon has blocked @HarryAlffa. Why? Seems because I was asking Duncan if he had read bailoutswindle.com. He “promised to read and get back” to me. Some months later asked – no reply. Asked – no reply …. blocked.

Maybe he’s more on the side of the banks than the workers? Only reason for not supporting the policy ideas at http://www.bailoutswindle.com; can you think of any others?

Regionalisation of banks is presumably motivated by the size of the balance sheet – small enough to fail. But another option would be sector based banks and as arguably you need sector experts when making lending decisions anyway, a national bank focussed on, for example, agriculture, or e-fulfilment, or subsets of manufacturing could be more efficient. So the policy should be to limit the size of the balance sheet of banks (though how this would play with EU regulation is beyond my ken), rather than specifying in advance the form of bank required, which seems like a ‘centralised micro managing of the solution’ step too far.

Write more, thats all I have to say. Literally, it seems as though you relied on the video to
make your point. You clearly know what youre
talking about, why throw away your intelligence on just posting
videos to your blog when you could be giving us something informative to read?